Ch 12

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Chapter on the Fed - Taken from Introduction to Business …

Chapter on the Fed - Taken from Introduction to Business
Glencoe - 2006

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  • 1. pp. 174-189 Chapter 12 Money and Financial Institutions
  • 2. The History of Money In the monetary system goods and services are indirectly exchanged using money, which can then be exchanged for other goods and services.
  • 3. Graphic Organizer Functions and Characteristics of Money Graphic Organizer FUNCTIONS
    • Medium of exchange
    • Standard of value
    • Store of value
    CHARACTERISTICS
    • Stable
    • Scarce
    • Accepted
    • Divisible
    • Portable
    • Durable
  • 4. Banking The banking system is the main type of financial institution, or organization for managing money, in our economy.
  • 5. Storing Money A bank account is a record of how much money a customer has put into or taken out of a bank.
  • 6. Storing Money Checking accounts are used for storing money in the short term so you can draw on it easily if you want to go shopping or pay a bill.
  • 7. Storing Money Savings accounts are used for storing money over a long period of time.
  • 8. Storing Money Interest is a rate the bank pays you for keeping your money there. If a bank pays you 5 percent interest per year on a $1,000 savings account, you’ll have earned $50 after one year.
  • 9. Transferring Money Banks make it easy to transfer money from one person or business to another.
  • 10. Transferring Money Today more banks are using electronic funds transfer (EFT) to move money around. With EFT, money is transferred from one account to another through a network of computers.
  • 11. Lending Money The money you deposit in a bank makes it possible for the bank to lend money to other customers.
  • 12. Lending Money Most bank loans require some form of collateral. Collateral is something valuable you put up for a loan.
  • 13. Lending Money The four main types of loans that banks offer are:
    • A mortgage loan
    • A commercial loan
    • An individual loan
    • A line of credit
    continued
  • 14. Lending Money A mortgage is a deed to give the property to the lender if the loan is not paid back.
  • 15. Other Financial Services Many banks provide financial advice on managing and investing your money. You can also store valuable items, such as jewelry and certificates, in safety-deposit boxes.
  • 16. Other Financial Services Many banks offer credit cards. Banks also manage trust funds, such as an inheritance.
  • 17. Commercial Banks Commercial banks offer a full range of services such as checking and savings accounts, loans, and financial advice. They are often called full-service banks .
  • 18. Commercial Banks To make a profit, commercial banks usually charge much more interest on the money they lend than the interest they pay on savings accounts.
  • 19. Savings and Loan Associations Savings and loan associations were originally set up to offer savings accounts and home mortgage loans.
  • 20. Savings and Loan Associations The purpose of the savings and loan associations was to encourage people to save money and make it easier to buy a home or start a business.
  • 21. Savings and Loan Associations Savings and loan associations charged lower interest on loans and paid higher interest on savings. In the 1980s about 20 percent of savings and loans failed.
  • 22. Savings and Loan Associations The government passed new regulations allowing savings and loan associations to charge higher interest rates and offer more services like credit cards.
  • 23. Credit Unions Credit unions are nonprofit banks set up by organizations for their members to use.
  • 24. Credit Unions Credit unions offer members a full range of services, including credit cards, checking accounts, and loans.
  • 25. Credit Unions Credit unions offer low-interest loans and pay high interest rates on savings accounts.
  • 26. Other Financial Institutions Mortgage companies provide loans specifically for buying a home or business . Finance companies offer short-term loans to businesses.
  • 27. Other Financial Institutions Insurance companies not only provide protection against things like fire and theft, but also offer loans to businesses.
  • 28. Other Financial Institutions Brokerage firms that sell stocks and bonds may also offer a wide range of financial services to its customers.
  • 29. The Federal Reserve System The Federal Reserve System (or Fed) is the central banking organization in the United States.
  • 30. Functions of the Fed The six functions of the Fed are:
    • Clearing checks
    • Acting as the federal government’s fiscal agent
    • Supervising member banks
    continued
  • 31. Functions of the Fed
    • Regulating the money supply
    • Setting reserve requirements
    • Supplying paper currency